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After years of hype and unfulfilled promises, IP telephony also known as Voice over IP (VoIP)has finally evolved as a true option for small and medium-size businesses. The technology of sending voice packets over data pipes has been refined and has matured, offering a number of benefits over traditional phone networks.

Not only do today's VoIP systems match the voice quality of regular phone systemsbased on the TDM (time division multiplexing) systemthey're adding features that businesses never would have imagined. For example, with VoIP, callers can reach you no matter where you are by dialing your office number. And with a Web browser, you can retrieve your voice mail.

The main benefit, of course, is cost savings. Though initial equipment costs can be considerable, with most implementations of VoIP the distinctions between local and long-distance calls go away almost completely. And when signing up with a hosted service, such as an IP Centrex provider, you can keep up-front costs to a minimum.

VoIP calls made over a private networkfor example, from a main office to a branch officeare free. And even if you're calling someone who is not on the network and doesn't have VoIP, you can still realize significant savings. Through deals with broadband service providers or other hosted services your calls are still carried either free via the Internet or at highly discounted flat ratesabout 2 to 3 cents a minute.

Today, there is much more to VoIP than the early consumer applications, which involved cumbersome Web interfaces and using PCs with headphones instead of handsets. In the early days of VoIP, there was also a lack of widespread broadband, a problem augmented by poor voice quality and the difficulty in finding people to connect with at the other end. Only over the past five years, since the introduction of the first IP gateways, has the technology been adapted for standard business phone use.

Enterprise customers have firmly grabbed hold of this new technology, and now manufacturers old and new are eyeing small and medium-size business markets. (We define small as having fewer than 100 employees and medium-size as 100 to 500.) The industry is heating up to the point where these businesses can choose from a dozen or more IP PBX (IP private branch exchange) systems and nearly as many service providers offering hosted VoIP solutions.

With so many choices available, business owners need to understand their own requirements, the pros and cons of IP telephony in general, and the distinctions among the various solutions before deciding how to implement VoIP, if at all.

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